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Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation

Melanie Arntz (), Stefan Boeters (), Nicole Gürtzgen and Stefanie Schubert
Authors registered in the RePEc Author Service: Nicole Guertzgen ()

Economic Modelling, 2008, vol. 25, issue 3, 422-439

Abstract: We present a consistent microsimulation-AGE model combining the labour market AGE model PACE-L, data from the German Socio-Economic Panel and a discrete choice labour supply estimation. The model is used to analyse a reform that cuts the social assistance minimum income and lowers the transfer withdrawal rate in order to encourage labour force participation at the lower end of the wage distribution. We compare a disaggregated and an aggregated version of the model as well as a partial and a general equilibrium variant. It turns out that both disaggregation and general equilibrium feedback tend to mitigate the labour supply response to the reform proposal. While some labour supply indicators react quite sensitively to the level of aggregation, most macroeconomic variables are considerably more robust.

Date: 2008
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Working Paper: Analysing welfare reform in a microsimulation-AGE model: the value of disaggregation (2006) Downloads
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